ICO launches first issue of "Social Bonds" in Spain, for 1 billion euros

ICO launches first issue of "Social Bonds" in Spain, for 1 billion euros


The aim of this transaction is to finance SME's in regions with GDP per capita lower than the Spanish average, in order to help maintain or create employment.

With this bond issue, ICO positions itself at the forefront of trends in international capital markets and expands its investor base through the incorporation of funds that prefer to invest in these types of bonds.

Instituto de Crédito Oficial (ICO)  issue 1 billion of "Social Bonds" making its debut on the Sustainability Bond Maket.

"Social Bonds", fall under the framework of what are known in international capital markets as "Sustainability Bonds". The funds generated by this type of placement are used to finance operations that have a positive social or environmental impact.

This first "Social Bond" issued by ICO was for 1 billion euros, has a term of 3 years and pays an annual coupon of 0.50%. Credit Agricole, Goldman Sachs International, HSBC and Santander were the banks leading the operation. The bond issue captured good anchor of interest from investors, with demand over to 2 billion euros.

It should be noted that a wide array of investors participated, with 33% of the issue placed with Fund Managers, 30% with public institutions, 19% with insurance companies and pension funds, and 15% with Central Banks, and 3% with private banks.

Geografically, the majority of the allocation was distributed to accounts based in Asia & Middle East with 24% ob the bonds, followed by Germany and Spain with 15% each, UK 11%, France 11%, Netherlands 7%, Scandinavia 5%, other European countries 10% and America 1%.

With this new product, ICO strengthens its position as a leading issuer, given that it was the first Spanish issuer to issue "Social Bonds".

ICO's "Social Bonds" aim to create or maintain employment in the most economically depressed regions in Spain, i.e., those that have a per capita income below the national average. These zones currently have an unemployment rate that is equal to or greater than 19%.

With the funds captured with these "Social Bonds", ICO will finance, through Mediation Lines, SME's that are located in regions with per capita income that is lower than the Spanish average. The financing of companies in certain sectors that are considered unsustainable from the social responsibility perspective will be excluded.

In order to launch its "Social Bonds", ICO had to be classified by an external auditor as a "Socially Responsible Issuer", prior to the placement. This classification was granted by Sustainalytics, a leading company in the analysis of corporate social responsibility. ICO was also certified as a Socially Responsible Company by the firm, Bureau Veritas.

Commitment to Investors

To certify that the funds captured by these "Social Bonds", will be directed towards financing companies that meet the eligibility criteria, ICO promises to publish the following reports in 12 months time:

1. ICO will provide a breakdown by region and sector of where the funds obtained from the placement were invested. In addition, details will be provided on the number of SMEs, the number of employees, etc. This information will be included in the Investor Newsletter corresponding to the first quarter of 2016.

2. Sustainalytics' evaluation document: One year after the placement, ICO will make public Sustainalytics' evaluation which certifies whether the loans granted to the SMEs meet the eligibility criteria.

To increase awareness about this product, several teams from ICO travelled to different European capitals where they held meetings with different institutions that may have been interested in buying these bonds. The reception was extremely positive, which allowed the operation to be launched.

Through this placement, ICO has positioned itself on the cutting edge of current trends in international capital markets. Furthermore, it was able to respond to the demand from investors interested in acquiring this type of product, and thereby expanded its investor base.